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Personal finance: Where individual responsibility and systemic intervention were supposed to meet

In the 1920s, Hazel Kyrk, a researcher at the University of Chicago, looked at a concept called, “home economics” (Hira). This was a brand new area of study that emphasized the personal responsibility of individual and family money management. Through education, it was found that people would make smarter financial decisions.

Eventually, “home economics” became “personal finance.” This slight variation in names likely contributed to a rise in the personal culpability of one’s financial decisions. If you were given the proper education, tools, and were of reasonable intelligence, personal finance could help you budget, plan for the future, save for your dream home, and retire at a reasonable age.

Personal finance sets a standard of individual responsibility that is admirable, necessary, and vital to a motivated economy. Unfortunately, this framework is too simplistic to accurately appreciate our current, complex markets (e.g., credit default swaps, derivatives, zero-interest loans, and bundled home mortgages). We now live in an economy that besmirches and vilifies those who are struggling to make ends meet.

Fox News’ definitions for personal finance and class warfare

Photo: Fox News’ Coverage of “Entitlement Nation.”

In endless loop after loop of tragic soundbites, Fox News has made it their goal to unsolicitedly define personal finance for the American people. Those who could not move up income ladders were at fault for not trying hard enough. Those who were fired, took unemployment benefits, and found themselves without a job for extended periods were at fault for not hustling enough. Those without college degrees, barely making minimum wage, were never supposed to make a living wage. Even worse than these myths that persecuted the majority of earners, was a rhetoric regarding “class warfare.”

Fox News suggested that those who protested against big banks, stood for tax reform, and filled the streets looking for change (i.e., Occupy Wall Street protests) were simply looking for handouts from the government. By their standards, these lazy, narcissistic Millennials hadn’t paid their dues – they weren’t worthy of their protest. Suddenly, reasonable financial reforms, argued via peaceful protest, were seen as class warfare – a scourge that nobody should stand for.

The irony is that every bit of evidence points to wholescale, systematic actions that defeat the lower and middle class, effectively preventing them from being able to properly engage in personal finance. Many of the wealthiest 1% of this nation are engaging in a ruthless political battle to protect more of the financial pie. With record high income inequality, police action on peaceful protests, big bailouts for bankers, and a cycle of self-victimization, this is the real class warfare.

Police, the War on Drugs, protests, and more!

As a nascent resident assistant, I grew to love my on-campus, university police. The police were a friendly bunch that helped immensely when physical assaults, verbal abuse, and when serious health complications arose. But a couple pivotal moments also occurred during this time that tempered my admiration for police: First, I was contributing to the wholesale punishment of minor drug offenses (e.g., calling out students that were smoking marijuana in the halls, which would eventually become legal in my state). Second, YouTube and various media outlets showed vicious beatings and law enforcement abuses of students protesting inequality. In both instances, people were punished severely for minor offenses or mere inconveniences to established populations.

Photo: Alan Diaz/AP Wikipedia

Increasing emphasis surrounding the “War on Drugs” led to the Rise of the Warrior Cop. Essentially, officials pumped billions of dollars to feed and encourage the prosecution of low-level drug offenders. By arresting and taking out these small-time criminals, enforcement agencies received more kickbacks from the federal government. Special Weapons and Tactics (SWAT) teams became a popular “necessity” for any working police force, as no-knock raids became a popular highlight of service.

A police SWAT team raided the home of the mayor in the Prince George’s County town of Berwyn Heights on Tuesday, shooting and killing his two dogs, after he brought in a 32-pound package of marijuana that had been delivered to his doorstep, police said. (Washington Post)

Only after SWAT teams broke through the door of this mayor’s home, killing both dogs, and holding the family at gunpoint, did they realize this was the wrong house. While never admitting fault, the police eventually declared that the mayor was innocent, and that the package of marijuana was part of a larger ring of smugglers – not associated at all with Mayor Calvo.

This may be but an example of the excessive use of force on innocent people, but there’s an epidemic of these tactics. In Berkeley, California, during the Occupy Wall Street protests, students gathered peacefully. They were arguing for financial reform and serious change. The administration and on-campus police forces grew tired of the campsites and wanted to forcibly remove them from the lawns. Arm-in-arm, the students stood firmly against the police force’s new interdiction. But despite their peaceable assembly, the police dragged, beat, and slammed the weaponless professors and students.

Big-time bailouts, bonuses for bankers

In 2007, a massive financial crisis tanked pensions, bankrupted banks, and sent the world economy into a massive recession. Behemoth banks like Lehman Brothers shuddered their staff and went belly up. Bear Stearns, despite being rabidly recommended by stock guru, Jim Cramer, became a single digit stock before being swallowed up by a competitor.

Each news report was worse than the last, and there didn’t seem to be an end in sight. Wall Street and Main Street seemed to conjoin at this time of economic disfunction. Everyone needed to work together to bring back our economy. People were encouraged to keep spending, traveling, and consuming.

As wages stayed stagnant for lower and middle class employees, upper income salaries continued to climb at astronomic amounts. Seemingly, the more those wages increased, the more unemployment statistics increased. The correlation was undoubtable, and money was getting sucked up by a select few.

The worst trickery came in the form of “too big to fail” economics. Banks had metastasized beyond healthy size. To let major banks fail would’ve led to full-scale economic ruin. Insurance policies, pension plans, and much more would disappear because of one company, AIG, alone. The federal government stepped in to “save” the big banks, handing them a poorly recorded ledger that held the keys to tiny interest rates and flexible return dates. The banks would be able to keep lending!

The success of bailouts was met with financial reward for the highest echelons within the banking world. Despite the monies intention, to keep lending to those in need, executives received record salaries and bonuses directly from taxpayers’ wallets. The rich asked for a handout – demanded it – and got it. But the lower and middle income classes didn’t financially improve and benefit from the major bailouts; rather, stagnation continued. Nevermind Fox’s “Entitlement Nation” segment, this was “Entitled Elite Nation.” Where was Main Street’s bailout?

Mr. Blankfein goes to Washington

Photo: Senate Hearing with CEO Goldman Sachs, Lloyd Blankfein

The Wolf of Wall Street catalogs the grift and greed of former swindler, Jordan Belfort. In a classic pump, dump, and commission system, Belfort made millions by ripping off people that didn’t know much about investing. There’s a scene in the movie that shows the staff of the corrupt investment firm admitting no wrongdoing, because they simply “could not remember” or “recall”… well, anything.

As I sat through this part, I laughed aloud – this was exactly what Lloyd Blankfein, CEO of Goldman Sachs, and his boys did in broad daylight to Washington politicians. Fueled by a large cadre of layers, Goldman’s staff admitting nothing, forgot everything, and looked shocked by the allegations of wrongdoing. Rather than be chastised and censured, the executives were treated like princes – geniuses of business.

This kind relationship between business interests and politicians has long been present, but has progressively declined in recent years. With the painful introduction of corporate and wealthy interests paying for elections via Citizen’s United, lobbying power has grown to epic proportions. It’s far more easy for moneyed powers to meet and arrange times with Congressmen and the Executive Branch.

Billions of dollars are being spent yearly on Washington-based lobbyists, and they’re warring against lower and middle class values (by in large). The Citizen’s United court ruling may have suggested the corporations were people, too, but they sure don’t show it. From the Keystone XL pipeline to financial deregulation to tax holidays to reduced capital gains taxes, the wealthy are having their say while the majority miss out.

The narcissism of self-victimization and cycle of class warfare

Income Inequality in America. Photo: Wikipedia

Brilliantly, maniacally, Fox News jettisoned a perverted phrase into the ether and attempted shut up those who were suffering under crushing income inequality. Class warfare was stolen and misappropriated by the richest for the richest. Critique, protest, and concern was met with this singular phrase: class warfare.

To villainize those with modest means when they ask for help and hope during record-breaking, inequal times (see Inequality for All) is a horrific moral atrocity. The surprising amount of people that believe that the American Dream is alive and well are sorely mistaken.

In a way, there’s an egoistic, narcissistic self-victimization and cycle that the most affluent who lobby against reforms are propagating. The message encourages you to pity the rich, as their lifestyle is under attack. Class warfare is a tragic thing to be a recipient of, but that misses the request and reality. People are arguing for modest reforms, not a hatred of the wealthiest 1%.

Reforms that must occur to address record income inequality and sinking social mobility

To, in turn, villainize the rich defeats the purpose and point of this article. Wealth is not inherently bad, and should be encouraged to some extent. Wealth creation and capability adds to a vibrant entrepreneurial foundation that is at the heart of the American Dream. This is not a country that should squash this zeal for industry, but real reforms must still occur.

Regulations, income tax reforms, capital gains tax increases, and massive funding for educational programs may be a lot to ask, but we need these things to continue to prosper as a nation. Right now, staggering income inequality is holding us back from reducing our massive deficit and debt (from individuals to our entire country).

Sensible solutions may be found in “The Buffett Rule,” which asserts that the capital gains taxes are out of date for the amount of wealth that’s held in stocks. The idea was started by Buffett, when he pointed out that it made no sense how his secretary paid around 30% income tax, while he skated by at around 15%. One of the richest men ever was arguing for modesty at a time of great immodesty. The bill and proposal would’ve only affected the wealthiest 0.3%. Even this was struck down by the “do-nothing” Congress.

Fox News and corrupt elite misappropriated and annexed the term, class warfare. But they don’t deserve the phrase – it’s not theirs. Not since 1928, have we seen such blatant inequality. Attempts at peaceful protest are being beaten down by riot and SWAT police, and hampered by economic hardship of the masses that makes them “Too poor to protest.” The largest bailout packages ever were delivered to the Wall Street elite, and Main Street sat back and suffered – there wasn’t a handout to the average Joe. The worst, most disgusting portion surrounds the self-victimization of the Fox News elite – whining like they are under attack from their cathedrals of drivel.

As Russell Brand suggests, perhaps it’s time for a reevaluation of our political system. Money has destroyed politics and those who care to serve the majority. Individual voices are drowned by the moneyed powers. We are living in a political dystopia. The only question that remains: What will we do about it?

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In September, 2011, New York City’s Zuccotti Park was flooded with tents and protesters. Sparked from an Adbusters article, the Occupy Wall Street protests began. The movement championed a variety of ideals that included wealth equality, removing money from politics, and reducing corporate influence in our political system. Diverse groups flocked to the streets to argue for a better future; potentially, one without massive corruption and greed. But the idyllic dreams faded as the campers were kicked out of the park and cities used police powers to destroy the collected masses across the country.

If you’re here, you’re probably part of the 99%

If you’ve ventured onto Frugaling.org, you’re likely interested in saving money and becoming more frugal. Moreover, you’re probably a proud member of the 99%… of incomes. The Occupy Wall Street movement embodied a siren call that said, “We are the 99%.” They owned their place in society and called for greater income equality.

The anger and resentment are building, as people think about the exorbitant bonuses that Wall Street marketmakers are taking home. Most of the recovery in Obama’s economy are limited to the richest/highest earning populations. In fact, the income inequality is reaching record proportions.

In 2012, the top 10 percent of earners took home more than half of the country’s total income.

…The 1 percent has captured about 95 percent of the income gains since the recession ended. (NYT)

The New York Times’ Op-Ed Columnist, Paul Krugman, says it best:

In practice, inherited wealth and connections matter enormously; those not born into the upper tier are, and know themselves to be, at a huge disadvantage. (NYT)

In India, they’ve long had a caste system that stratifies the demographic groups. You are frequently born into a group and the income pressure force you to stay planted in this domain. What Krugman is alluding to is a caste system in the frame of India’s horrific class structure that limits income mobility and opportunities in life – right here in America.

The consequences of mass income inequality

Poverty and income inequality both distract and debilitate people from being able to think critically. The tragic irony is that financial decisions, debt, savings, and everything that Frugaling stands for may be unattainable in this environment. Basically, there’s an unmet basic need in those suffering from poverty.

Photo: Wikipedia

In 1943, a psychology professor and researcher introduced a basic hierarchy, construct for understanding how everyone has basic needs. This pyramid included Physiological, Safety, Love/Belonging, Esteem, and Self-Actualization. An individual would be working up to a self-actualized state, but certain needs must be met first. This is called Maslow’s Hierarchy of Needs.

Poverty and income inequality test the limits for critical thinking because people are fundamentally fighting for more basic needs such as Safety. Without a universal, socialized, single-payer health care option, those most in need are forced to find basic health needs before thinking critically about a budget. When resources, property, employment, and/or health are questioned, the more advanced needs are pushed back. These requirements are particularly important when the most vulnerable populations are fighting to survive – much less to to protest, share, and become active members of societal decisions.

Protesting defamation and destruction in the impoverished

I want to take you through a little real-life experience. As a graduate student at a solid state school, I’m quite privileged with my opportunities and future employment. But graduate students like me are often short on time and money. Many are raising families at the same time. The lifestyle can be brutal.

Over the last decade, my home university has been proposing a reconstruction project and new buildings to university-owned apartments. Year after year passed without resolution, and the older buildings aged terribly. Something needed to happen, as the most vulnerable school populations were living in evermore dilapidated housing.

Colloquially, these were referred to as a project and ghetto. The most diverse students and families occupied these buildings. Housing was exceptionally affordable – cheapest in the city – with many basics covered (e.g., water, cable, internet). Despite the horrid, storied exteriors, these were an exceptional choice for those studying at the highest level of academia and the smallest wallets.

Then a resolution quickly swept over the university apartment system. New buildings and contractors were being brought in to discuss all the financial complexities. At the end of this dialogue, the university decided to do something morally aberrant. Instead of keeping the university-owned land and property, they decided to lease the land to a private property management company. Now, this property company would finally revitalize the campus housing, but the consequences to the most in need would be terrible – a trade-off that was easily overlooked by school administrators and a company that stood to benefit from serious rent increases.

As the private company builds their own property on the campus, I’ve spoken to many vulnerable student populations. My frequent question is: Will you be staying? The answer is often “no,” because they can’t afford the nearly 100% increase in rent. They’ll be forced to move out of their apartments and a diaspora of diverse students will look elsewhere in the city. Families of four, recent immigrants, those on student visas, and many other groups are now being pushed out of their homes – forced to pay up or get out.

Something seemed evil about the process, and I began to ask people if there were ever protests on campus. Nobody ever heard, was aware, or participated in any. Because these students were in a rough financial spot and short on time, gathering a mass of protesters was a near impossibility. It never came to fruition. And now, the huddled masses must move on.

Should we defend the rich because they pay the most taxes?

The rich are definitely getting richer – this is an economic fact. But more importantly, the rich are collecting most of the income growth, too. A growing debate is being waged between world leaders regarding income inequality. Surprising participants are chiming in for a powerful, heated argument.

A couple of the top mayors have chimed in to support the wealthiest populations – even going so far to argue that we should thank rich people. The former mayor of New York City, Michael Bloomberg, has stated that the rich are a blessing for the city of New York. Because millionaires and billionaires pay lots of tax revenue back to the city and state, Bloomberg believes that we should honor and respect their riches. Over his tenure, he hesitated and prevented income tax increases on the wealthiest populations. Former Mayor Bloomberg even suggested that the wealthy may leave in droves if taxation increases, but this hasn’t been proven. Moreover, the current Mayor, Bill DeBlasio, has refuted this claim:

Bloomberg isn’t alone in his defense of the rich. Mayor Boris Johnson of London, England also wrote about the need to thank the rich for their support of the city’s economy. These “tax heroes” (the 0.1%) pay for about 14.1% of tax revenue for the city. The mayor suggests that this is a positive thing and speaks to the contribution that the rich have on the economy. The oligarchic mayor even proposed giving knighthoods to the largest tax payers:

In fact, we should stop publishing rich lists in favour of an annual list of the top 100 Tax Heroes, with automatic knighthoods for the top 10. (The Telegraph)

After reading these two mayors defend the rich, you’d think the wealthy lifestyle was under attack – a war was being waged. But frankly, the lobbying power of the rich has stifled accurate, fair debate. And the masses – the 99% – are mostly silent again.

Thankfully, a growing number of leaders are speaking out about this economic problem that is sure to doom the masses without serious changes. Pope Francis has been an outspoken critic of trickle-down economics and supported reforms to the current capitalistic culture.

How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?

Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion… has never been confirmed by the facts.

While the Catholic church has often held that the impoverished are the most needed groups for their mission work, the analysis and critique of powerful, governmental economic systems has been overlooked. Pope Francis is bringing a sweeping message of hope to those who’ve suffered amidst these deleterious economic practices.

The President of Uruguay, José Mujica, has also been a firm supporter of those most in need financially.

Quoting the Roman court-philosopher Seneca, Mr. Mujica said, “It is not the man who has too little, but the man who craves more, who is poor.”

Mujica also upset some in Uruguay’s political establishment by selling off a presidential residence in a seaside resort city, calling the property “useless.”

His donations leave him with roughly $800 a month of his salary. He said he and his wife, Lucía Topolansky, a former guerrilla who was also imprisoned and is now a senator, do not need much to live on.

INDEED, if there is any country in South America where a president can drive a Beetle and get by without a large entourage of bodyguards, it might be Uruguay, which consistently ranks among the region’s least corrupt and least unequal nations. (NYT)

President Mujica is shirking the glam and pomp of the presidency’s opulence. Taking home around $800 a month is a ridiculous sum for a president, but the consequences have been incredibly positive. Uruguay is one of the most progressive nations in the region and widely considered to be the least corrupt. By shedding the affluent lifestyle of his predecessors, he has stripped the hierarchy and social class that may remove him from his people. He is a role model and advocate for moderation among a cultural malaise that argues for more and more growth.

When you’re too poor to protest a culture collapses

The biggest threat to our long-term economy is income inequality and social stratification. Without some sort of correction, we will be doomed to relive the mistakes that aristocracy found in generations prior to this. It’s scary to think that I may ever be too poor to protest the conditions and treatment I receive, but the risk is growing. The richest are getting even richer than the rest – the power, influence, and control of government is terrifying.

What control do we, the 99%, have when politicians can be lobbied and motivated to support the wealthiest? Who will protect the most needy?